Directors and Officers Insurance: Financial Concerns for Non-Profits

Directors and Officers Insurance: Financial Concerns for Non-Profits

Managing the finances of non-profit organizations requires a thorough understanding of how its capital is structured, the way the entity is set up, and how to institute a plan of action in order to meet its long-term financial goals. Here are a few tips to share with your non-profit clients about what separates their financial practices from those of for-profit entities.

Budget: Accountants for non-profits typically need to perform several steps when it comes to developing a working budget. In order to do this, there needs to be a working capital that has to be distributed according to said budget.

De-centralizing the process: Allow each manager to oversee their own budget so that they can essentially “own” a portion of the budget unique to their area of the non-profit. Mini-budgets may be adjusted to fit within the construct of the larger macro budget.

Revenue: This is an important and unique aspect of non-profits. In a for-profit business, revenue is generated in the form of payment in exchange for goods or services. However, non-profit agencies generate revenue in the form of contributions as well. So, their financial considerations include being able to determine the value of non-traditional revenue such as donated goods or services.

Accounting accuracy: This is imperative in any industry, however non-profits need to ensure all their expenses are documented and fall within the constraints of the organization’s non-profit charter. Accounting within a non-profit agency requires an eye for detail, especially since some contributions have requirements attached to them about how they are to be used.

PLRisk Advisors is a leading wholesale insurance brokerage covering the professional liability market. Our team of seasoned professionals has the depth and breadth of knowledge to help our agency partners secure the best quality coverage for their clients. We provide Directors & Officers insurance specifically designed for the exposures faced by non-profit companies. Please contact us today for more information at (855) 403-5982.